Singapore’s 2012 inflation was 3rd highest reading since 1991

But here’s some good news.

According to Barclays, Singapore’s inflation in 2013 will likely show an improvement from 2012 levels. Both headline and core inflation rates in 2012 were high at 4.6% and 2.5% respectively.

For the headline rate, this was the third highest print since 1991, superseded only by 2008 (6.6%) and 2011 (5.2%).

The 2.5% core inflation rate was also significantly above the 1.7% historical average, and an acceleration from 2011’s 2.2%. Both inflation measures were above the GDP growth rate (1.2%) in 2012.

Singapore’s Inflation Hits 4.3% In December 2012

Rising costs driven up by cars and housing.

Singapore’s consumer price index (CPI) rose to 4.3% in December 2012, according to the Singapore Department of Statistics (Singstat).

Inflation for Accommodation cost reached 8.5% in December, due to the base effects associated with Government rebates for HDB households.

Certificate of Entitlement (COE) premiums contributed to the increase in private road transport costs, rising to 9.3% in December 2012.

For the whole of 2012, CPI-All Items inflation averaged 4.6%, lower than the 5.2% in 2011.

Figures for 2012 are as follows:

  • Transport: 8.2%
  • Housing: 6.7%
  • Healthcare: 4.6%
  • Education & stationery: 3.5%
  • Clothing & footwear: 2.6%
  • Food: 1.5%
  • Communications: -1.3%

For the full year, CPI-All Items inflation is likely to be 3.5% – 4.5% in 2013.


What is keeping inflation high in Singapore? What is the government doing to help mitigate rising prices?

Published Date: 14 December, 2012




Inflation is measured by the increase in the Consumer Price index (CPI). The CPI basket consists of more than 6,500 brands/varieties of goods and services commonly purchased by resident households.

Some of the components of CPI are affected by the cost of imported goods (e.g. food), while some are affected by domestic cost pressures.

  1. The main drivers of Singapore’s high inflation today are domestic cost pressures, which stem from supply side conditions. Imputed rentals on owner-occupied accommodation (OOA) have been increasing on the back of a tight housing market. However, imputed rentals on OOA have no cash impact on households who already owned their homes. 
  2. The increase in transport costs has been driven largely by the increase in Certificate of Entitlement (COE) premiums as a result of the lower supply of new COE quotas.
  3. The tight labour market in Singapore has also led to higher wages throughout the economy. When the cost of hiring a worker increases, businesses may charge higher prices for goods and services to offset the cost increase. As a result, the broad categories of healthcare, education as well as recreation in the CPI have recently experienced price increases to some extent.

The government keeps a close watch on consumer price developments from both imported and domestic inflation, and undertakes several measures to mitigate them. 


Measures to mitigate imported inflation
The Monetary Authority of Singapore (MAS) has allowed the Singapore dollar to appreciate so as to help mitigate higher prices of imports such as food and oil.


To keep the costs of prepared food affordable, the National Environment Agency (NEA) intends to adopt management models that can help keep costs low.  For example, NTUC Foodfare, a social cooperative, was appointed to run the new Bukit Panjang Hawker Centre on a not-for-profit basis.  In addition, NEA plans to add 10 more hawker centres across Singapore to provide affordable food options to Singaporeans. 


In addition, the Retail Price Watch Group (RPWG), headed by Senior Minister of State for Trade & Industry and National Development, Mr Lee Yi Shyan, keeps a close watch on any excessive price increases of food and other daily necessities. For non-prepared food, the RPWG has worked with supermarkets, wholesalers, hawkers, and food courts to promote the availability of cheaper alternatives.  The RPWG’s supermarket members – NTUC FairPrice, Giant and Sheng Siong – have for various periods held constant the low prices of their housebrand products to help consumers cope with rising costs.


Measures to mitigate domestic cost pressures

The Ministry of National Development has taken significant steps to boost the supply of Build-to-Order (BTO) HDB flats and private residential property. The subsidies for HDB flats are also regularly reviewed to ensure that public housing are affordable, especially for first-time buyers. The government has also implemented a number of demand management measures, and will continue to monitor the housing market closely.


To manage the possible impact of a tight labour market, the government works with unions and companies to raise productivity. This can be achieved through improving the production processes of companies, as well as encouraging workers to upgrade their skill sets. With enhanced productivity, firms will be able to pay their workers better salaries and cope with higher business costs, without the need to pass on the increased costs to consumers.


At the individual household level, the government also provides cash grants directly to help mitigate the impact of rising costs on households.  For example, the U-Save rebates are provided to help HDB households directly offset their utilities bills. Although these grants do not reduce CPI inflation, they help to cushion the impact of the rising cost of living experienced by households.


The government will continue to keep a close watch on inflation, and is prepared to introduce additional measures if necessary.

Government Measures To Contain Rising Costs And Help Lower Income Group

Parliamentary Sitting Date: 13 August 2012

To ask the Deputy Prime Minister and Minister for Finance in view of the recent report of an increase in the consumer price index in June compared to May 2012, (a) what further steps will the Ministry take to contain the rising costs especially in the accommodation and transport sectors; and (b) what further steps will be taken to help the lower-income group, who may be hardest hit with the rising cost of food.

Reply by DPM and Finance Minister Tharman Shanmugaratnam:

On a year-on-year basis, Singapore’s CPI-All Items inflation rose to 5.3% in June 2012 from 5.0% in the previous month. This includes imputed rentals on owner-occupied accommodation (OOA), which is a statistical concept but has no cash impact on households. Excluding imputed rentals on owner-occupied homes, inflation was 4.4% in June 2012. We expect this to moderate towards the end of the year.

Food Inflation

Food inflation has in fact eased since the start of this year, from 3.0% in the first quarter to 2.4% in the second quarter. This was due to moderated cost increases for both prepared and non-prepared food [1]. The Department of Statistics does a comprehensive survey of prices of food items in the typical household’s basket. While some items like sea bass, watermelon and cheese have gone up significantly over the last year, others like chilled lean pork, carrots and hen eggs have stabilised or declined.

The Government nevertheless keeps a close eye on food price inflation. To keep the costs of prepared food affordable, the National Environment Agency (NEA) intends to adopt management models that can help keep costs low. For example, NTUC Foodfare, a social cooperative, was appointed to run the new Bukit Panjang Hawker Centre on a not-for-profit basis. In addition, NEA plans to add 10 more hawker centres to provide affordable options to more Singaporeans.

Further, the Retail Price Watch Group (RPWG), headed by Senior Minister of State Lee Yi Shyan, keeps a close watch on any excessive price increases of food and other daily necessities. For non-prepared food, the RPWG has worked with supermarkets, wholesalers, hawkers and food courts to promote the availability of cheaper alternatives. The RPWG’s supermarket members – NTUC FairPrice, Giant and Sheng Siong – have for various periods held constant the prices of their house-brand products to help consumers cope with rising costs.

Besides daily necessities, healthcare and education costs can be of much concern to the lower-income households. This is why we have substantial transfers to help them, including our subsidies for healthcare, child-care and education, all of which are tilted in favour of lower-income families.

The GST Voucher Scheme, which was introduced in this year’s Budget, will also benefit lower- income households significantly. For instance, a retiree household staying in a HDB 3-room flat will receive $960 on average each year from the GST Voucher Scheme.

Accommodation and Transport

The Government is committed to keeping public housing affordable. While house prices are not part of CPI inflation, they are of concern to young families especially those who do not yet own their homes. MND has taken significant steps to boost the supply of Build-to-Order (BTO) flats, and to increase supply of private residential property through the Government Land Sales programme. We have also implemented four rounds of property market cooling measures, and will continue to monitor the situation.

Where transport is concerned, the cost increases have been driven largely by the increase in COE prices. Public transport costs have in fact remained very stable over the last few years. As part of the planned slowdown of the vehicle growth rate, it was necessary to proceed with the reduction in new COE supply from August 2012. We recently refined the vehicle quota system and will continue to invest heavily in improving public transport, which is the most fundamental solution to keeping transport costs in check.

Monetary Policy

MAS has continued to implement a calibrated tightening of monetary policy through appreciation of the Singapore dollar, so as to help curb imported and demand-led inflation. MAS will review its monetary policy stance again in October.


The Government will continue to keep a close watch on inflation, and is prepared to introduce additional measures if necessary.


(A) Managing Our Dependence on Foreign Workers

(A1) Reduction in Dependency Ratio Ceilings (DRCs)

To manage our foreign worker inflow, DRCs will be reduced from 1 Jul 2012 as follows:

  • Manufacturing: from 65% to 60%.
  • Services: from 50% to 45%.
  • S Pass Sub-DRC: from 25% to 20% for all sectors.

Companies will have to comply with the new DRCs/Sub-DRCs for new foreign workers from 1 Jul 2012. For existing workers, companies will be given until 30 Jun 2014 to comply.

(A2) Reduction in Man-Year Entitlement (MYE) Quota

The MYE quota for new projects in the construction sector will be further reduced by 5% in Jul 2012. Foreign worker levies for basic skilled workers hired outside these MYE quotas will be raised.

More details can be found on the Ministry of Manpower website at

(B) Measures for SMEs

(B1) Higher CPF Contribution Rates for Older Workers

The CPF contribution rates for workers aged above 50 years will be increased from 1 Sep 2012. The CPF contribution rates for those aged above 50 years to 55 years will eventually be raised to reach the full CPF contribution rate of 36%.

(B2) Enhanced Special Employment Credit (SEC)

The SEC is enhanced to encourage employers to engage older Singaporean workers aged above 50. It will more than offset the increase in employer CPF contribution rates for older workers.

The SEC scheme will be in place for the next five years (2012-2016). This will cost $470 million per annum. The Government will set aside $2.4 billion for the SEC payouts for the next five years. More details are available on the SEC website at

(B3) SME Cash Grant

The Government will provide companies with a one-off cash grant, pegged at 5% of their revenues in YA2012, capped at a payout of $5,000. To qualify, the companies must have made CPF contributions to at least one employee. The scheme will cost around $320 million in FY2012.

(B4) Enhancements to Productivity and Innovation Credit (PIC) Scheme

The PIC scheme will be enhanced to benefit smaller companies:

  • Increase in cash payout from 30% to 60% for up to $100,000 of firms’ PIC expenditures per YA. This will apply for YA2013 to YA2015.
  • Companies can claim cash payouts on a quarterly basis instead of at the end of the financial year. This will apply from 1 Jul 2012.
  • Claims for in-house training costs of up to $10,000 a year will not require external certification. This will apply from YA2012.

(B5) Enhanced Training Support for SMEs and Self-Employed Persons (SEPs)

Enhanced support for training for SMEs for three years, starting from Jul 2012:

  • Course subsidy: 90% for WDA-certified courses and Academic Continuing Education and Training (CET) programmes at polytechnics and ITE.
  • Absentee payroll cap: Increased from $4.50 to $7.50 an hour.

Similar training benefits will be provided for self-employed persons. WDA will work with industry associates and agencies, such as the National Taxi Association and MDA, so that individuals such as taxi drivers and freelancers in the creative sector can benefit.

More details will be provided during the Ministry of Manpower and Ministry of Education Committee of Supply debates.

(B6) Grants to Support SME Upgrading and Productivity

Grants for capability development will be raised from 50% to 70% over the next three years under schemes managed by SPRING and IE Singapore. This will provide a $200 million boost over the next three years.

(B7) Renovation and Refurbishment Deduction Scheme

From YA2013, the amount of expenditure that may be claimed under the Renovation and Refurbishment Deduction Scheme will be raised from $150,000 to $300,000 for each three-year period.

(B8) Mergers and Acquisitions (M&A) Scheme

A 200% tax allowance (to be written down in 1 year) will be given on the transaction costs incurred in M&A, subject to an expenditure cap of $100,000. This will apply for M&A completed between 17 Feb 2012 and 31 Mar 2015.

(C) Capturing Opportunities for Growth

(C1) Helping Companies Internationalise


Project Financing

A project finance company (PFC) will be established by a consortium of financial institutions led by Temasek Holdings to plug gaps in financing for larger, long-tenure cross-border projects. The Government will guarantee the debt instruments issued by the PFC. At steady state, the PFC is expected to provide about $400 million of financing every year, in turn catalysing about $2-$3 billion of projects annually.

Trade Financing and Political Risk Insurance

The current suite of trade financing schemes under IE Singapore will be expanded to support Singapore companies in cross-border trade, including helping companies with the cost of political risk insurance.

More details will be provided during the Ministry of Trade and Industry Committee of Supply.

Double Tax Deduction for Internationalisation

Double tax deduction may be given automatically, instead of on an approval basis, on qualifying expenses incurred on key overseas expansion activities. This will apply for up to $100,000 of expenses incurred for each YA, from 1 Apr 2012.

(C2) Tourism

The Government will inject an additional $905 million into the Tourism Development Fund to grow the tourism sector by attracting higher-spending tourists.

The GST Tourist Refund Scheme will be extended to international cruise passengers departing from the existing Singapore Cruise Centre and the upcoming International Cruise Terminal. The scheme will be implemented in Jan 2013.

(C3) Marine and Offshore

The Government will allocate $150 million from the National Research Fund to A*STAR and EDB to build our R&D capabilities to develop solutions for deepwater oil production.

(C4) Gold Trading Hub

The supply of investment-grade gold and other precious metals will be exempt from GST from 1 Oct 2012.

(C5) Providing Tax Certainty

To provide upfront tax certainty, clear guidelines will be provided specifying when a company will not be taxed on their gains from disposal of equity investments.

(C6) Excise Taxes on Non-Cigarette Tobacco Products

The excise duties on (a) beedies, “ang hoon” and smokeless tobacco; and (b) unmanufactured tobacco will be raised by 20% and 10% respectively with effect from 17 Feb 2012.

(D) Enhancing our Transport System

(D1) Carbon Emissions-based Vehicle Scheme (CEVS)

The current Green Vehicle Rebate (GVR) scheme will be replaced with a new CEVS in Jan 2013. This will cost the Government $34 million per year.

CEVS is based on carbon efficiency and will be applicable to all new passenger cars. Cars with low carbon emissions will enjoy rebates on their ARF of up to $20,000, while those with high carbon emissions will have to pay a registration surcharge of up to $20,000.

For commercial vehicles and motorcycles, the Government will extend the GVR scheme till end-2014.

More details will be provided during the Ministry of Transport Committee of Supply.

(D2) Lowering of Special Diesel Tax for Euro V Vehicles

The Special Tax for Euro V-compliant diesel cars will be lowered from $1.25 per cc to $0.40 per cc from 1 Jan 2013.

(D3) Removal of Additional Transfer Fee (ATF)

The ATF, levied on used-vehicle transactions, will be removed with effect from 18 Feb 2012. This amounts to $70 million per year in revenue forgone.

GST Voucher

The Government has introduced a permanent system of offsets in the form of a GST Voucher to help our lower-income Singaporeans, and has set aside $3.6 billion in the GST Voucher Fund to finance the scheme for the first five years. The GST Voucher will fully offset what our elderly households staying in 1- to 3-room HDB flats pay in GST, and offset about half of the total GST bills for our lower-income families (who do not have elderly members).

The GST Voucher has 3 components and will cost $680 million in FY2012:

    • GST Voucher – Cash: The amount that an eligible Singaporean will receive is based on his income and the value of his home, as shown below:

GST Voucher – Cash

    • The annual value criterion of $20,000 will cover all HDB properties as well as lower-end private properties.
    • GST Voucher – Medisave: This comprises an annual top-up to the Medisave Accounts of older Singaporeans aged 65 and above and living in properties which have an Annual Value that does not exceed $20,000. About 85% of all elderly Singaporeans will benefit.

GST Voucher – Medisave

    • GST Voucher – U-Save: These will be given to all HDB households to help directly offset their monthly utilities bills.

GST Voucher – U-Save

Singaporeans can expect to receive their annual GST Voucher – Cash and GST Voucher – Medisave from Aug 2012 onwards. The GST Voucher – U-Save will be given out in Jan and Jul each year, starting Jul 2012.

Singaporeans who qualify for the GST Voucher will receive a letter in Jul 2012.